the U.S. is counting on

a long-term abundance of oil & natural gas

The Reality

The Reality is that the government’s long-term forecasts—the ones everyone is relying on to guide our energy policy and planning—are overly optimistic. An exhaustive, county-by-county analysis of the 12 major shale plays in the U.S. (accounting for 89% of current tight oil and 88% of current shale gas production) concludes that both oil and natural gas production will peak this decade and decline to a small fraction of current production by 2040.

Shale plays suffer from high decline rates and declining well quality as the “sweet spots” run out, meaning that ever more wells will have to be drilled just to keep production flat—until even that is no longer achievable. Continued drilling requires massive amounts of capital, which can only be supported by high levels of debt or higher prices.

Diminishing Returns

High productivity shale plays are not ubiquitous and wells suffer from very high rates of depletion.

The Drilling Treadmill

Because depletion rates are so high and drilling locations increasingly unproductive, industry must drill ever more wells just to offset declines.

Questionable Profits

To continue drilling rates, industry will need prices to rise substantially or have to take on more debt, which may not be sustainable.

If the long-term future of U.S. oil and natural gas production depends on resources in the country’s deep shale deposits, as the Energy Department contends, we are in for a big disappointment.